Fruit Computer Company manufactures memory chips in lots of ten chips. From past experience. Fruit knows that 85% of all lots contain 20% (2 out of 10) defective chips, and 15% of all lots contain 60% (6 out of 10) defective chips. If a good (that is. 20% defective) batch of chips is sent on to the next stage of production processing costs of $1500 are incurred, and if a bad batch (60% defective) is sent on to the next stage of production, processing costs of $5100 are incurred. Fruit also has the alternative of reworking a batch at a cost of $2500. A reworked batch is sure to be a good batch. Alternatively, for a cost of $100. Fruit can test one chip from each batch in an attempt to determine whether the batch is defective.

• Determine how Fruit can maximize the expected utility value of total cost per batch where

• Compute EVSI and EVPL